What are the on-job trade conversations in fixed income S&T?
Hi guys, I've got a quick question to the guys on the fixed income sales desk (or trading).
I wanted to know what are the conversations between the clients and sales (or sales -> traders) are when doing a trade.
(I used to work as a FX sales, so let's say a lifer would come in and say 'buy 50 usdjpy, work it') Obviously there are a lot more products as a fixed income sales, but just curious what are the actual trade requests in the conversations are from the clients. Any examples of IRS, credit, gov bonds, or something common in the market would be great.
Cheers
Usually the way it works in FI S&T is traders will send out inventory runs to the force/the Street in the morning. In turn, the salesman will send out those runs to all of their clients. Most of the time the salesman will call clients asking for levels that work, etc. and in turn they’ll go back the trader and see if they’ll sell at the level/what sales credit will be. Then you have all of the new issue stuff. You’ll send out price wires/deal screens to clients during the order period, and clients will place orders/give levels that work for them. It’s a lot of back and forth between the client, the salesman, and traders.
What does “inventory runs” mean?
Thanks
So inventory runs are just snapshots of all of the inventory offerings a dealer has. The function is RUNZ in BB. Every dealer sends out an O+O run in the morning (stands for own and offer) and that’s what sales will use to pitch product. Also start learning what takedown increments are. Sales credit is always paid in eighths. So if a dealer sends out an O+O run in the morning, and you see something like “JPM 4’s of 21 come L1/8” that means the dealer is allowing a 1/8th concession. I hope these are some useful examples for you.
the standard language for the bond market is
client xyz to sales: hey john, offer me 100mm 10yr notes sales to trader: client xyz asking for an offer on 100mm 10yr notes trader: "at 15+" sales to client: "15+ offer" client to sales: "i'll buy those" sales to trader: you can do that trader to sales: thats done sales to client: thats done...you just bought 100mm 10yr notes at 15+
fantastic, great. guess for bond market is rather similar to FX then..
any guys from the IRS desk for any examples
swap convention is to quote on the legs - normally for vanilla USD spread is quoted against fixed leg; for cross-currency basis swaps quoted against non-USD leg (if swapping against USD). E.g. EURUSD quotes on EUR spread, GBPUSD swaps against GBP.
i work buy-side private credit (don't trade too often) so my quote convention may be a little off, but normally the sales guys understand what i am asking for
ex:
me: hihi can i have plz $100 mio 5YR JPYUSD x-ccy ir swap bank: -50.875/-50.375 me: ok i buy bank: ok you buy us$100 mio 5 YR pay JPY -50 7/8s receive USD LIBOR flat me: done
at start of the swap nominals are exchanged, equivalent at spot (say $100 US and 11,016 JPY), interest payments made in between indicative of the swap (i pay JPY -50 7/8s and receive USD LIBOR) then at maturity we re-exchange the same nominals, regardless of current spot fx risk. essentially x-ccy swaps are loans to each other with interest.
this is a kind of long topic but for x-ccy ir swap you can make the nominals mark to market (e.g. nominal on one leg adjusts to current spot fx rate) to reduce credit risk or non-mtm, both nominal amounts are fixed
thinking about this conceptually; it expresses my preference for dollars as i am willing to accept a below-market rate on my jpy loan (to counterparty) to receive par usd.
This is pretty spot on. OP, it depends on the product/market but something like:
Bump.
Do the sales guys pitch any products to clients?
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